Distinct classes of serotonergic (5-HT) neurons develop along the ventral midline of the vertebrate hindbrain. Here, we identify a Sonic hedgehog(Shh)-regulated cascade of transcription factors that acts to generate a specific subset of 5-HT neurons. This transcriptional cascade is sufficient for the induction of rostral 5-HT neurons within rhombomere 1 (r1), which project to the forebrain, but not for the induction of caudal 5-HT neurons,which largely terminate in the spinal cord. Within the rostral hindbrain, the Shh-activated homeodomain proteins Nkx2.2 and Nkx6.1 cooperate to induce the closely related zinc-finger transcription factors Gata2 and Gata3. Gata2 in turn is necessary and sufficient to activate the transcription factors Lmx1b and Pet1, and to induce 5-HT neurons within r1. In contrast to Gata2, Gata3 is not required for the specification of rostral 5-HT neurons and appears unable to substitute for the loss of Gata2. Our findings reveal that the identity of closely related 5-HT subclasses occurs through distinct responses of adjacent rostrocaudal progenitor domains to broad ventral inducers.